How to "take profit" from credit spread

D

Derrenoption

Hello,

I have a question about how we should calculate when "taking profit" from a credit spread for example.
Let us say that we have 29 dollar credit received for a PUT credit spread:

SELL strike 121 at bid: 1.20
BUY strike 119 at ask: 0.91
Credit: 120 - 91 = 29 dollar

If we now for example want to close the credit spread if we can see a 50% profit of the max profit which is 29 dollar.

Then I wonder what the bid and ask should be for the example below?

BUY strike 121 at ask: ???
SELL strike 119 at bid: ???
 
I think of that we bring in 29 dollars in credit if we put in 1 contract in each leg?

I am not exactly sure of the question. I have heard that if the position durings its life Before expiration has reached a 50% profit of the maxprofit which in this case is 29 dollar. It is possible to close the position at that point.

I beleive I am looking for an example of how this looks like exactly mathematically? (Another example than mine perheps is better)
 
CyJackX,

I beleive you are right there. So can we confirm that this would be a correct example where we close the spread for a 50% profit(14.5 dollar) of the max possible profit(credit received at entry)?

ENTRY:
SELL strike 121 at bid: 1.20
BUY strike 119 at ask: 0.91
Credit: 120 - 91 = 29 dollar

EXIT:
BUY strike 121 at 0.60
SELL strike 119 at 0.455


Profit: 120 - 60 = 60 dollar
Loss: 91 - 45.5 = 45.5 dollar
Total: 60 dollar - 45.5 dollar = 14.5 dollar
 
Yes. Your math is correct, not accounting for trade costs.

But, why do this math manually? Does your broker's software not allow you to trade the spread as an aggregate unit?

Or are you trying to leg in and out?
 
Then I understand. Yes, the broker allow to trade the spread as an aggregate unit but I just tried to theoretically be sure what is happening so I understand it better.
 
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